While the country's near-term growth outlook firmed up, it is at the cost of "further large and continuous increases in private and public debt, and thus increasing downside risks in the medium term," the report said.

The IMF maintained its forecast of 6.7 percent growth for this year, but the report warned that the country's debt load could soar from around 235 percent of gross domestic product last year to more than 290 percent in 2022.

Debt-fuelled investment in infrastructure and real estate has underpinned China's growth for years but Beijing has launched a crackdown over fears of a potential financial crisis.

The IMF recommended that Beijing press on with reforms to further boost consumption.

"China has the potential to sustain strong growth over the medium term," the report said.

"But to do this safely requires accelerating reforms to rebalance towards less credit-intensive growth, while using still-sizeable buffers to smooth the transition."